Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/237792 
Year of Publication: 
2021
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2021-059/III
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
We investigate the relationship between macro fundamentals and credit risk, rating migrations and defaults during the start of the COVID-19 pandemic. We find that credit risk models that use macro fundamentals as covariates overestimate credit risk incidence due to the unprecedented drops in economic activity in the first lockdowns. We argue that this break in the macro-credit linkage is less affected if we take an unobserved components modeling framework, both at shorter and longer credit risk horizons.
Subjects: 
COVID-19
credit risk
macro fundamentals
frailty factors
dynamic latent factors
JEL: 
G21
C22
Document Type: 
Working Paper

Files in This Item:
File
Size
811.57 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.